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TMI Blog2021 (5) TMI 1052X X X X Extracts X X X X X X X X Extracts X X X X ..... for selection of suitable persons to enter into a joint venture arrangement with RVUNL and form a joint venture company to undertake coal mining and arrange for its transportation and delivery to the Thermal Power Stations ("TPS") of RVUNL in the State of Rajasthan. iii. Adani Enterprises Limited ("AEL") was selected as a successful bidder, and accordingly incorporated a Joint Venture Company named Parse Kente Collieries Limited ("PKCL'') the Applicant herein. RVUNL holds 26% equity while AEL holds 74% equity in the Applicant company. A Coal Mining and Delivery Agreement ("CMDA") was entered into on 16th July, 2008 between RVUNL and the Applicant. Broadly summarized, the salient features of the CMDA are as under: (a) The Applicant would carry out all Works, as defined therein, from identification of techno commercially viable coal blocks to coal mining and arranging for delivery of coal to RVUNL's TPS; (b) All expenses incurred for the Works are to be borne by the Applicant, including all expenses in relation to the cost of acquisition of land/lease of land, fees and arranging of clearances, reports and licenses and all charges incurred for arranging mining data, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is for 90% of the mining fee payable in cash, which is computed with reference to the quantity of washed coal at the contract price as per CMDA. The second invoice is for the balance 10% of the mining fee payable in cash, computed with reference to the quantity of washed coal at the contract price as per CMDA. These two invoices are issued by PKCL, Chhattisgarh on RVUNL, Chhattisgarh. GST at the rate of 18% under heading 998622 is charged. The third invoice issued by Applicant on RVUNL, Chhattisgarh is also for the mining fee, computed with respect to the property in the reject coal transferred to PKCL in terms of the CMDA. Here too, GST is charged at the rate of 18% under heading 998622; On the basis of the two invoices for mining fees payable in cash issued by PKCL, AEL raises back to back invoices. RVUNL, Chhattisgarh also issues two invoices, one for the washed coal on RVUNL's TPS where such washed coal is delivered. The other invoice is on the Applicant for the coal rejects with the following description "Washery Rejects (Barter Supply against Mining Service)". Under the two invoices issued by RVUNL, Chhattisgarh GST is charged @ 5% which is. tax leviable on coal u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Applicant showed the payment of Compensation Cess, which was paid after availing ITC of the Compensation Cess paid by RVUNL, the Applicant issued a Credit Note to the customer for the same. The Applicant, in other words, did not collect the Compensation Cess on coal rejects from its customer prior to 26th July, 2018 also. 3. It is in this context that the Applicant is seeking ruling on the following issues:- I. Whether Compensation Cess is leviable on total quantity of raw coal or washed coal? II. Whether coal rejects supplied by Coal Washery are exempt from levy of Compensation Cess once Compensation Cess on raw coal or, washed coal and coal rejects, as the case may be, is discharged? III. If the answer to Question (II) above is in the affirmative, whether subsequent supply (or sale) of coal rejects attracts Compensation Cess? 4. Personal Hearing:- Keeping with the established principles of natural justice, personal hearing in the matter was extended to the Applicant through virtual mode and accordingly their authorized representative Shri Vishal Agrawal(Tax Practitioner), Shri Manish Saxena (Chief Financial officer) & Shri Haresh Nikam (Manager, Corporate Accounts and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ruling so sought by the Applicant would be binding only on the Applicant and on the concerned officer or the jurisdictional officer as above. 5.2 Now coming to the merits of the case it is seen that Notification No. 01/2017-compensation cess (Rate) dated 28.06.2017 prescribes rate of Compensation cess to be levied on the intra-state or inter-state supplies of certain goods mentioned in said notification. Serial No. 39 of the Notification No. 01/2017-compensation cess (Rate) doted 28.06.2017 prescribes the following rates of compensation cess:- S.No. Chapter / Heading / Sub-heading / Tariff item Description of Goods Rate of goods and services tax compensation cess 39. 2701 Coal; briquettes, ovoids and similar solid fuels manufactured from coal. Rs. 400 per tonne Thus, as per Notification No. 01/2017-compensation cess (Rate) dated 28.06.2017, Rs. 400 per tone is leviable as compensation cess under Chapter Heading /Sub-heading 2701. Further as per Notification No. 01/2017-Central Tax (Rate) dated 28.06.2017, 2.5% Central GST is also leviable for the same heading i.e. 2701 under schedule I. 5.3 Notification No.02/2018-Compensation Cess (Rate) dated 26/07/2018, read with corr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MDA") dated 16th July, 2008, the Applicant would carry out all Works, as defined therein, from identification of techno commercially viable coal blocks to coal mining and arranging for delivery of coal to RVUNL's Thermal Power Station and that the Applicant is required to establish a Coal Washery and deliver the washed coal of the required specifications to RVUNL. Also as per clause 5 of Coal Mining and Delivery Agreement ("CMDA") dated 16th July, 2008 between RVUNL and the Applicant, furnished by the Applicant along with their application, the Applicant is entitled to reimbursement of various expenses such as railway freight, access charges for the delivered coal, service tax and other taxes including any taxes to apply in the future, at actuals, subject to furnishing of documentary evidence. The Applicant has also mentioned in their application, that before the introduction of the GST regime it was agreed by RVUNL that the entire amount of excise duty and clean energy cess leviable on coal and which was RVUNL's liability, would be deposited by the Applicant upfront in the cash ledger of RVUNL, on the entire quantity of raw coal (i.e. the quantity of coal mined by the Appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, 2018 (read with corrigendum F. No. 354/255/2018-TRU(Pt-II) dated 02.08.2018) was issued, amending Notification No. 1/2017 - Compensation Cess, thereby inserting a new Entry 41A, which read as under - "41A 27 Coal rejects supplied by a coal washery, arising out of coal on which compensation cess has been paid and no input tax credit thereof has been availed by any person. NIL"; 5.8 The Applicant has contended that it is entitled to supply the reject coal without paying any Compensation Cess in terms of Entry 41A of Notification 01/2017-Compensation Cess, as amended, in as much as, i. It is a coal washery as in terms of the CMDA, it was required to set up a coal washery, where the raw coal was required to be washed ii. the rejects have arisen out of coal on which Compensation Cess liability has been discharged by -RVUNL Chhattisgarh at the time of the supply of such coal to its thermal power station in Rajasthan. iii. no input tax credit has been availed of by RVUNL Rajasthan, as the same is used for generation of power, supply of which is exempt from levy of GST. 5.9 Applicant is further of the view that the entire objective of providing for NIL rate of Compensation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rate of Rs. 400 per metric tonne is also paid and the same stands mentioned in the tax invoice issued by RVUNL Chhattisgarh to RVUNL Rajasthan. 5.13 The quantity of rejects remains at the washery. There is no physical movement of the rejects from the washery to RVUNL. The relevant clause in the CMDA on rejects is set out herein. 3.4.1.................... The company acknowledges that the entire coal mined from the coal block shall, except as provided in Clause no. 4.5.4, also be the property of RVUNL except for the coal washery rejects not exceeding 29% (the "Rejects") which shall be the property of the Company and shall be disposed by the company as determined by the Company's Board of directors..... 5.14 Thus from the CMDA supra, it follows that the Applicant has a right to receive the coal rejects from RVUNL. It also follows from the said CMDA that RVUNL raises a tax invoice in favour of the Applicant for the rejects, to give effect to the above clause in the CMDA. Such tax invoice is evidence of transfer of property in the coal rejects from RVUNL to the Applicant, as contemplated in Clause 3.4.1 of the CMDA. The same constitutes a supply within the meaning of Section 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and upon mining of the raw coal, washes the same. Thus, the obligation to undertake washing under the CMDA squarely lies upon the Applicant and in the instant case the Applicant gets the coal washed by AEL, on sub-contract basis, thereby the obligation to undertake washing is on the Applicant. This is also apparent from the fact that the Applicant raises an invoice on RVUNL for mining services in respect of coal rejects. 6.2 The Applicant have also submitted that the liability of GST including compensation cess stands discharged on the total quantity of coal arising out of mining, which follows that the coal rejects which are supplied by RVUNL to the Applicant are coal rejects arising out of the coal which is mined under the CMDA on being subjected to the process of washing and on such coal rejects liability of compensation cess already stands discharged. The Applicant have further declared that the washed coal is used by RVUNL at its thermal power stations and that GST leviable on electricity is at NIL rate and that accordingly there exist no question of any availment of ITC by RVUNL of the Compensation Cess paid on washed coal. It has also been the contention of the Applicant th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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